Well hello 2023 and thank you so much for bringing your 4^th quarter buddy from 2022 along for the ride. Did you think a partner for this journey would allow you to cruise in the HOV (High Occupancy Vehicle) lane and avoid all the traffic? Well think again! It’s not like you aren’t going to be dealing with enough issues on your own but now you have a co-pilot that’s packed a bunch of baggage filled with high interest rates, inflation that is “Flying High Again” (Ozzy Osborne) or housing starts that keep going down.

Okay then….just to be sure that everyone gets a more realistic view at the coming landscape for 2023, I thought I would throw in some numbers that will keep you up at night. Have you already started clipping coupons out of the daily newspaper? Do people still do that? I digress.

I’ll keep this brief. (Whatever that word means 😊) so that we don’t set off any pacemaker alarms. Here goes nothing:

From the NKBA 3^rd Quarter Report – 2023 Full Year Revenue Guidance

• 11% Price Growth 2022
• 7% Volume Decline – Units
• 65% of Designers experiencing cancellations or postponements
• 74% of K & B Owners expect flat or declining revenues in 2023.
• 4% Sales Growth 3^rd Quarter 2022
• K & B Sourcing more affordable products

NKBA Jan 2023 Forecast

• New Construction -17% or 95.7B
• Remodeling -10% or 66.7B
• Average Decrease 14%
• Total Spending 162.4B

Statista Household Savings

• 2021 Q3 2.287 B
• 2022 Q2 1.734
• Reduction 24.2%

CNBC & WSJ

• Housing Mortgage Applications down 40%
• Refinancing down 86%
• 67% of projects are funded by savings.
• 16% of remodeling from home equity lines
• Total – 83% Savings & Equity

Signs in the marketplace

• CPI @ 6.5% -lower but a long way from 2%
• The Fed will probably add at least two more .25 PT bumps in the first part of 2023 and then lay low to see how inflation trends.
• I wouldn’t expect them to reverse course and lower rates until 2024 unless a midsize recessions lands in our lap.
• Tech jobs are being reduced in a way we have not seen before:
  • Amazon -18K
  • Alphabet Inc/Google -12K
  • Microsoft – 10K
  • Salesforce – 7K
  • Meta – 11K
  • Twitter – 3.7K

Now you might be wondering why I bring up the stats on these Tech Giants. Good question. They are shedding all these jobs because they see the writing on the wall and decided it might be good to reduce expenses to reflect the downward growth signals. The Nasdaq ( Tech companies) had a nice pop in stock yesterday because the market saw them batten down the hatches and cut expenses.

Time to bring it back home to the K & B Industry I still believe we are looking at a 20%+ drop in sales this year. Why? The Quick list –

• Promotions of 10-15% off on semi-custom products
• More value driven products across the board
• Single Family home starts continue to decline.
• Solid dip in remodeling
• Interest rates

And the list goes on like a bad dream. Well thanks Thad for bringing that chipper news to us….again! Do you find joy in dampening the mood? No, I do not but I also wouldn’t feel good about not saying anything and just watching the showroom doors shutter this year. Follow the math of the impact on a Dealer’s sales:

              3 million in sales @ a 35 margin = 1,050,000 in gross margin dollars

Now let’s look at a 20% reduction in sales:

              2.4 million @ a 35 margin = 840,000 in gross margin dollars

That’s $210K less. I have shared this before and do it again for good reason. You may be thinking that sales haven’t dropped much so far… Maybe it won’t be as bad as he says…then why does he keep writing blogs and sharing stats? Well, until those rose colored glasses become clear and you start looking hard at your business and what you need to do….then I guess I’ll keep writing them 😊

I will leave you with this positive note. You can make it the best year your company has ever had simply by getting serious about rebuilding your business model for the future!

• Invest time and resources into a system.
• Turn your customer journey into something that will WOW the consumer!
• Customer service training is a must.
• Make customer after care a priority.
• Learn how to process improve with a proven methodology. (Try Traction)
• Stop telling yourself you are too busy, or those things don’t apply to you
• Start building something that resembles an on-line strategy.

Do one, do some, do all! Yes, “brief” doesn’t exist in my world when it comes to something I am passionate about. If I didn’t care, you wouldn’t see me so fired up!

If you are headed to KBIS, please stop by our booth N2775, would love to chat. Take care and good luck in 2023! Cheers! Thad

P.S. I promise more fun & stupid jokes in my next blog 😊